{
  "title": "Fiscal Risk Sharing in China: Is It Significant and How to Further Improve It?",
  "publication": "IMF Working Papers, September 20, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/09/20/fiscal-risk-sharing-in-china-is-it-significant-and-how-to-further-improve-it-554992",
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  "summary": "The COVID-19 pandemic has weakened the fiscal positions of local governments in China, while the recent stress in the Chinese property market has further compounded this issue, calling for stronger fiscal risk sharing among provinces.",
  "sections": [
    {
      "heading": "Authors and publication",
      "content": "- By Fei Han, Grace Li Bin, Chenqi Zhou\n- September 20, 2024\n- IMF Working Papers, Working Paper No. 2024/200\n- Issue: 200\n- Volume: 2024\n- Pages: 33\n- DOI: https://doi.org/10.5089/9798400289835.001\n- ISBN: 9798400289835\n- ISSN: 1018-5941\n- Stock No: WPIEA2024200"
    },
    {
      "heading": "Research question and context",
      "content": "- The COVID-19 pandemic weakened the fiscal positions of local governments in China.\n- Recent stress in the Chinese property market has further compounded local fiscal pressures.\n- The paper analyzes whether central-to-local fiscal transfers provide meaningful interprovincial risk sharing and how that effect could be enhanced."
    },
    {
      "heading": "Main findings",
      "content": "- Fiscal transfers have played an important role in risk sharing across provinces, although their main purpose remains redistribution.\n- An alternative transfer mechanism is proposed in which the size of transfers to each province is linked to the shocks that the province is facing.\n- Counterfactual simulations indicate that this alternative mechanism can significantly enhance risk sharing among all provinces against idiosyncratic shocks while maintaining a comparable level of redistribution effect."
    },
    {
      "heading": "Methodology and evidence",
      "content": "- The paper examines the existing central-to-local governmental transfer system and its effect on interprovincial risk sharing and redistribution in China.\n- Uses counterfactual simulations to evaluate the proposed alternative transfer mechanism.\n- Annex I contains data description and details related to the counterfactual simulation (listed as a keyword in the source)."
    },
    {
      "heading": "Policy recommendations and implications",
      "content": "- Link transfer sizes to province-specific shocks to enhance fiscal risk-sharing effects.\n- Consider intergovernmental reforms and other structural measures to further improve policy efficiency and effectiveness.\n- Preserve redistribution objectives while increasing risk-sharing responsiveness to idiosyncratic shocks."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: COVID-19, Expenditure, Fiscal policy, Fiscal transfers, Fiscal union, Health, Revenue administration, Tax refunds\n- Keywords: Annex I. data description, counterfactual simulation, COVID-19, Fiscal transfers, Fiscal union, IMF working paper 24/200, intergovernmental reform, LG bond issuance, local government, redistribution, Risk sharing, Tax refunds\n\nIMF Working Paper No. 2024/200 — Fiscal Risk Sharing in China: Is It Significant and How to Further Improve It?\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/09/20/fiscal-risk-sharing-in-china-is-it-significant-and-how-to-further-improve-it-554992"
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    "Authors: Fei Han, Grace Li Bin, Chenqi Zhou",
    "Published: September 20, 2024",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400289835.001",
    "By Fei Han, Grace Li Bin, Chenqi Zhou",
    "September 20, 2024",
    "IMF Working Papers, Working Paper No. 2024/200",
    "Issue: 200",
    "Volume: 2024",
    "Pages: 33",
    "DOI: https://doi.org/10.5089/9798400289835.001",
    "ISBN: 9798400289835",
    "ISSN: 1018-5941",
    "Stock No: WPIEA2024200",
    "The COVID-19 pandemic weakened the fiscal positions of local governments in China.",
    "Recent stress in the Chinese property market has further compounded local fiscal pressures.",
    "The paper analyzes whether central-to-local fiscal transfers provide meaningful interprovincial risk sharing and how that effect could be enhanced.",
    "Fiscal transfers have played an important role in risk sharing across provinces, although their main purpose remains redistribution.",
    "An alternative transfer mechanism is proposed in which the size of transfers to each province is linked to the shocks that the province is facing.",
    "Counterfactual simulations indicate that this alternative mechanism can significantly enhance risk sharing among all provinces against idiosyncratic shocks while maintaining a comparable level of redistribution effect.",
    "The paper examines the existing central-to-local governmental transfer system and its effect on interprovincial risk sharing and redistribution in China.",
    "Uses counterfactual simulations to evaluate the proposed alternative transfer mechanism.",
    "Annex I contains data description and details related to the counterfactual simulation (listed as a keyword in the source).",
    "Link transfer sizes to province-specific shocks to enhance fiscal risk-sharing effects.",
    "Consider intergovernmental reforms and other structural measures to further improve policy efficiency and effectiveness.",
    "Preserve redistribution objectives while increasing risk-sharing responsiveness to idiosyncratic shocks.",
    "Subject: COVID-19, Expenditure, Fiscal policy, Fiscal transfers, Fiscal union, Health, Revenue administration, Tax refunds",
    "Keywords: Annex I. data description, counterfactual simulation, COVID-19, Fiscal transfers, Fiscal union, IMF working paper 24/200, intergovernmental reform, LG bond issuance, local government, redistribution, Risk sharing, Tax refunds",
    "**Working Paper**"
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